THE Philippine Economic Zone Authority (Peza) is proposing to include the defense industry in the new investment priority list under the recently enacted corporate tax reform measure.
Peza Director General Charito B. Plaza, in an interview with the BusinessMirror, said the investment promotion agency wants different industries, including the defense sector, to be part of the Strategic Investment Priorities Plan (SIPP).
SIPP is the list of investment sectors that may apply for fiscal incentives under Republic Act 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law, which took effect last month. “We hope to invite the defense industry, like the manufacturers of military aircraft, sea craft, uniform, the weapons, the vehicles,” Plaza said.
Plaza said Peza is awaiting the application from the Philippine Army identifying the military’s reservation areas that can be transformed into defense industrial complexes.
“Once we approve it in the board, we will now forward this to the Office of the President for the presidential compilation.
With that, we can already attract defense industries to locate in our defense industrial complexes,” she said.
Last year, the regulator of economic zones pitched the idea of building economic zones out of military reservation areas, which Peza said would require a memorandum of agreement with the Armed Forces of the Philippines (AFP).
Plaza earlier said the creation of a defense industrial economic zone will help in modernizing the country and defense forces, in addition to generating job opportunities and making profits from idle lands.
In March, Peza disclosed that it has continued its discussion with AFP regarding the utilization of military reserve lands as economic zones.
Plaza had previously said the Philippine Army is “managing almost 20,000 hectares of military reservation areas and we are now planning to make this the first defense industrial complex in the country.”
Currently, the Fiscal Incentives Review Board—co-chaired by the Department of Finance and the Department of Trade and Industry (DTI)—is finalizing SIPP, along with CREATE’s implementing rules and regulations (IRR).
3 industry tiers
SIPP breaks down the investment plan into three industry tiers. DTI Secretary Ramon M. Lopez earlier identified the following as critical industries under the new investment plan: electrical and electronics; chemical and pharmaceuticals; machinery and transport; agriculture and agribusiness; information technology-business process management; research and development; and artificial intelligence, automation, robotics, and digital technologies.
Under CREATE, the corporate income tax rate is reduced to 20 percent from 30 percent for domestic corporations with net taxable income of P5 million and below and have total assets of P100 million and below, effective July 1, 2020. All other local firms and resident foreign companies are imposed a 25-percent income tax.
Plaza recommended some provisions as well for the CREATE IRR, highlighting tax incentives and economic zone development.
“Once our proposals [are] considered, we really expect we will get more foreign direct investments,” she said.